What to consider before charging clients for canceled appointments

Before you implement a policy of charging clients for canceling appointments, read these salient points on the subject by Chip Camden.

Fellow TechRepublic contributor Bob Eisenhardt sent me a message in which he expressed frustration about clients canceling appointments at the last minute. Many of Bob's clients are doctors, and doctors often state a policy of charging extra when patients cancel appointments without some minimum notice. Bob is thinking about implementing a similar policy. It seems only fair.

I can see the justice in this for someone who has to travel to clients' offices -- especially if, like Bob, you have to cross a major metropolitan area such as New York City. A last-minute cancellation not only loses revenue, it still incurs the expense of doing business. It wouldn't make as much sense for someone like me who works from home and keeps appointments by phone and online meetings. If someone cancels, it takes me precisely two blinks to turn my attention to some other billable activity, and costs me nothing extra.

Another factor to consider is how much money you make from each client. If your typical client only generates a few hundred dollars of business each month, then a cancellation represents a significant chunk of the business you expected from them. On the other hand, you can more easily find it in your heart and wallet to forgive the loss of one appointment's revenue if your client is still going to write you a check for several thousand at the end of the month. In that case, a penalty for the inconvenience would seem petty.

You should also consider how much resentment a policy like this could generate. In Bob's case, I would expect little resistance from doctors who have the same policy towards their patients. On the other hand, small businesses that regularly bend over backwards for their own customers might consider this kind of policy a real slap in the face. Unless it's going to have a noticeably positive outcome, it's not a good idea to complicate your invoice with extra charges. It gives your client one more thing to contest. It may be better to raise your rates in general to account for your losses from cancellations.

If you do implement this policy, how much extra should you charge? If you charge too little, you'll seem ridiculous and petty. If you charge too much, you'll seem self-important and inconsiderate. You must find the right answer to that within your specific circumstances. Also, how late is too late? Twenty-four hours? The length of time needed to get to the client's office? Or the time it takes to schedule someone else in their place?

Finally, you should always be willing to make exceptions for exceptional cases. The death of a near relative or some other personal emergency gives you the opportunity to establish a human bond with your client by waiving the cancellation fee. Clearly show that you did so on your next invoice, but don't draw attention to it in the midst of their grief or crisis.

Everyone has an excuse for why they need to cancel; where you draw the line is up to you. One test might be: could you have reasonably expected them to make preparations that would have avoided the cause of the cancellation? Or perhaps you charge the fee by default, and only make exceptions when it feels right. What do you think?

About Chip Camden

Chip Camden has been programming since 1978, and he's still not done. An independent consultant since 1991, Chip specializes in software development tools, languages, and migration to new technology. Besides writing for TechRepublic's IT Consultant b...

Full Bio

Chip Camden has been programming since 1978, and he's still not done. An independent consultant since 1991, Chip specializes in software development tools, languages, and migration to new technology. Besides writing for TechRepublic's IT Consultant blog, he also contributes to [Geeks Are Sexy] Technology News and his two personal blogs, Chip's Quips and Chip's Tips for Developers.

This is a very dangeorus practice to use and, again, I would have be very very pressed to employ it. The primary of them are (a) repeat offense beyond a count of 3 and/or (b) long travel time from door to door. If it was a client just around the corner, NEVER would I do this. But by the time, for example, I am out a 40 minute drive or so, then this is a consideration. Rather one of those situation I can recognize when I see it. But, RARELY to be used. I am rather sorry now I raised this issue at all.

My wife works in healthcare and the "no show" rate runs 25% to 30% depending on the office. In theory they could charge but insurance won't cover it and no one will pay it, so in reality it just makes a bunch of extra paperwork. For some reason though, in healthcare no one "fires" a patient, but they'll sometimes overbook like the airlines, something that easily angers timely clients if they have to wait. My barber has, by his estimate, maybe a half dozen "no shows" a year. With him, 24 hours notice is fine, 2 instances less than that and he won't book you again. His business is fully booked.

Since I generally use public transport, even my travel time can go to other business projects. It simply becomes a home billable while in motion.
That said, there were a few times when I did incur some extrordinary travel costs, and they were becoming frequent. So, we simply agreed a 'liquidation fee' for the missed appointment that came to about a quarter day. It meant they could still count on me dropping everything and coming out to their site.

Instituting a cancellation policy seems like a good idea, but why? I've been a consultant for over 10 years and have only ocasionally had a sudden cancellation where was notified about in advance.
I tend to have the opposite problem, me cancelling scheduled appointments with clients because a emergency popped up. When this happens I immediately call my client and apologize and re-schedule as soon as possible.

I want to add - I am now the contractor - and have been the IT Manager contracting out. # I see respect as a two way street and did when i contracted work out to others.
# If I had to cancel in less than 24hrs, I'd offer to pay a fee to cover the contractors costs such as late cancellation fees for equipment etc.
# I also showed my respect by processing their bills as soon as they arrived on my desk.
# I also made sure that when a department wanted work done,(ie cable a new office layout) that the scope of work was finalised before the contractor came on site.
# I genuinely put thought into the Contractors situation and our business relationship, I wanted it to prosper to both our advantage.
I have had clients who dont care about how they treat contractors to their firm. I am happy to give that work to my competitors. I just think we shouldnt do everything at all costs for a customer. My contractors looked after me nicely due to the way I treated them - and I'd like it that way now that I have moved to the other side of the fence. I know you may loose a client who wants to spend big bucks - but me personally - I am happy to take a smaller chunk with someone who respects the quality of service I provide.,

First off, I'm not working as a contractor now, so this doesn't really affect me, but I'm wondering if it would make sense to [i]have[/i] such a policy outlined in your contracts, but be generous and specific in [i]enforcing[/i] it. For example, mark clearly on the invoice those times where you choose to waive it: family emergency, not wanting to upset a really good client, etc., but if you have a client with a history of late payments, or repeated late cancellations, you are within your rights to enforce your policy. Most of the time, you come off looking like the 'good guy,' or 'hero,' or whatever, but your butt remains covered when you need it. Thoughts?

The only time I had an issue with this type of behavior was when working for doctors and lawyers and they would be charged for my time and travel for late cancellations. Never had to do anything of the sort with anyone else.

You said, "It wouldn???t make as much sense for someone like me who works from home and keeps appointments by phone and online meetings. If someone cancels, it takes me precisely two blinks to turn my attention to some other billable activity, and costs me nothing extra."
If you're like me, I rarely conduct a phone or online meeting with out extensive preparation. So, there is a cost. But, I like your rules tempering how to deal with it.

bending over backwards because your customers bend over backwards is a great way to go out of business. Not only does it chop away at the bottom line, but if you have staffers who have to bend over, pretty soon you will be cooled by the stiff breeze of a revolving door and they come and go.

I agree with what's above, for the most part. For me, it comes down to respect for me and my time. If it's an honest cancellation, I'll typically let it slide unless extensive travel or related expenses were involved. On the other hand, I've had clients who were repeat offenders and didn't seem to care. In those cases, I don't hesitate to charge for every minute I am diverted from other revenue generating activities. Especially annoying are those times when I've traveled across the continent only to end up parked in someone's driveway waiting. It cost me a lot of time and money to get there. I'd much rather be doing something productive, but if they're going to pay to sit and wait, so be it.

I had a mentor years ago that taught me a few things about dealing with difficult clients. Among them was to keep perspective about the way you bill them. Some consultants are too adamant about chasing every conceivable billable minute and in turn can create an aversarial tone. He told me, "You can shear a sheep many times, but skin it only once." Consider the possible future opportunities to serve the client before you jeopardize the relationship over a single encounter.

Although I haven't ran a business, I have actually thought much about how a business could ensure that delinquent clients are punished without adversely affecting the clients who do the right thing.
I would most likely implement a '3 strikes' system. If the client is a "no show" or cancels at the very last moment (within 1-2 hours or less), they get 1 strike on their record. Each time the client receives these so-called 'strikes', I will remind them how many available strikes they currently have left and that I could charge them a cancellation penalty fee but I won't.
If, however, they have a legitimate excuse for their absence or late notice, e.g. they were involved in a car accident, a relative/friend had died etc. I would waive the fee.
Fortunately I don't live in a big city such as New York, Tokyo or London so, if I were in business, I can be more flexible with time constraints before I add the fee to the bill.

I go with these if then's
If they are good customers - I let it slide
If they don't pay on time - more often than not - I bill something
If they cancel often (ie decided to go shopping for the Weekend they booked me, I'll charge them a portion.
I am lucky, I can pick and choose my clients and have to close my books to new business for about 8 months of the year. It might be different if I wasnt this fortunate.

I would ONLY consider such a policy if I had a truly chronic case, a customer who just cancelled about three times or more. The idea is that our time is valuable and we shuffle our schedules around for other customers. Technically, a few cancellations can cost us a good client visit at another location. IE we have lost money. Do we take it on the chin all of the time? No. But this policy has to be carefully considered IF and only IF we have a truly BAD case of schedule maintainance by a client. The other alternative is just not to TRUST any appointment this kind of client makes.

Even in an extreme case, say the client canceled on an on-site where I had already booked flights, hotel, rental car, and told all my other clients I would be somewhat unavailable. Rather than charging them something for it, I'd let them know just what a huge allowance I'm making for them and strongly imply that they owe me one -- all in a friendly tone.

Here in the US, refusing to provide medical services can land you in legal trouble, with certain specific exceptions that do not include the patient's timeliness or ability to pay. However, your point is well taken. Since consultants are not legally required to provide services to anyone, we shouldn't put up with clients who abuse the relationship.

But I find that the preparation usually ends up being necessary in the long run anyway, so it isn't completely wasted. Although, I have to admit, sometimes if it gets put off long enough I have to revisit all the issues from scratch. Worth considering.

That sort of thinking will get you out of business quicker than you can say the word "punish." It's about making sure you get paid for the time and effort you spent on a client. There is a very natural tendency with people, and by extension, with businesses, to not value professional services. It's doubly true if you deal with I.T. and computers in any way.
If you're in business, you gotta run it like a business. Take it from someone who started out WAY too "The customer is always right." Whoever came up with that comment didn't have to deal with 21's century customers. You want to help people, go the extra mile, and make customers happy. But you have to be paid. And if you've agreed to meet a client, and you've made a trip, and they bug out, sorry, but you have to be compensated.
I put it like this...I can sit on my duff and do absolutely NOTHING and go broke a lot slower and with a lot less stress than I can running all over the place to solve people's problems, only to not get paid.
I didn't always do this, but I don't even start with a client now until they have some "skin in the game" and they've signed an agreement. No, that isn't always popular, and some people have moved on. Oddly enough, they were mostly the ones I had problems with in terms of being the cheapest, and hardest to satisfy.

I didn't mean to imply that I would 'punish' the client. I recognise that clients are human beings, however I've heard many business horror stories from others who bend over backwards for their customers and never get paid for the extra work they do.
As you have highlighted already, the customer is not always right. I've seen evidence of this in MMO circles, for example WoW or SWToR, were the game creators try to please all players, but it simply does not work.
I gave the example of using the '3-strike' system to lend some grace to clients. I realise that bad things happen to everyone. However, I'm would not be willing to travel and schedule appointments for clients who regularly abuse my energy, time and income when they're not prepared to pay for it.
I also forgot to mention that after a certain period of time, the client would be able to redeem their available 'strikes'. Perhaps I should call it the '3-lenience' system.
I've seen other businesses implement a similar policy and works quite well for them. However, since I haven't yet seen it applied to IT, I must admit I can't guarantee it would work in practice.

... on how many new clients you work with. If you're constantly cycling through new clients, then a well-stated policy is a very good idea. OTOH, if most of your clients have been with you for years, then the relationship can help dictate what's reasonable.